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Debt is a major burden in your life at any time, but problems associated with debt always seem magnified around the holidays.

If you’re already struggling with consumer debt, the holiday season is probably suffocating you with feelings of guilt, resentment, and frustration.

Today we’re going to talk about one option that seems to fly under the radar of many people who are desperately trying to get out from under the weight of their debt.

What Is A Consumer Proposal And Who Is Eligible?

A Consumer Proposal is a formal agreement between an individual (you) and your creditors with the purpose of settling your unsecured debts. To set one up you have to meet several criteria. This will include how much debt you have, assets you own, and whether or not you have another proposal open (you may only have one at a time).

The proposal officially changes the repayment terms of your debts. Using a mediator such as a licensed bankruptcy trustee, you’ll propose a repayment plan based on your current financial situation.

Advantages Of A Consumer Proposal

By formally addressing your intention to pay back your debts, you will, with the help of your trustee, be able to reduce the monthly payments for your loans. You may also be able to lower the interest rate on those loans, and in some cases a portion of the amount may also be forgiven.

By lowering the amount you owe as well as the interest rate, you’ll be able to get out of debt faster and with less stress than before.

As well, similar to debt consolidation, you’ll only be paying a single monthly payment towards your debt. This makes budgeting and planning much easier, and ensures you never forget or miss a payment.

On top of this, by setting up this legal framework to pay back your debts, you’re preventing your creditors from taking other legal action (such as garnishing wages or taking control of your property), halting services being provided (such as utilities), etc.

Sounds Great – What Are The Drawbacks?

Yes, there are a bunch of catches for going through this. A consumer proposal is almost like a low-level bankruptcy. These proposals become a part of the public record, so you can expect a lower credit score in the future and greater difficulties borrowing money or negotiating loans.

As well, unlike a more informal debt settlement plan where you call your creditor and try to renegotiate (which is often successful), the terms of a consumer proposal are legally binding.

How To Decide If A Consumer Proposal Is Right For Me

You should always understand all of your options when it comes to debt repayment. One of the best ways to understand your options is with a consumer proposal calculator, which will help you compare timelines and stipulations against other repayment options like debt settlement. Sites like http://debt.ca/ have many tools and calculators which can help you review your options.